tv Nightly Business Report PBS January 21, 2014 7:00pm-7:31pm PST
this is "nightly business report" with tyler mathisen and susie gharib. >> the stock market analysis, cramer's action alerts plus service is home to a multimillion dollar portfolio. you can learn more at the street.com/nbr. >> driving the dow, the index dragged lower from earnings from verizon and travelers and johnson & johnson. ibm could add to the misery tomorrow. >> oil slick, halliburton and baker hughes all post strong results but not just the american energy boom that's helping propel profits. >> staying warm, what's behind the shortage of heating fuel
across the country and rise in prizes. we have all of that and more for this tuesday, january 21st. >> good evening, on this cold and snowy day for much of the eastern part of the country, ibm, one of the priceyest and therefore one of the most important stocks in the price weighted dow index tried its best to warm things up on wall street. the world's largest technology services company reported better than expected earnings in the latest quarters, $6.13 a share, that's 14 cents better than the forecast. but the good news sort of ended there. margins narrowed ever so slightly and revenue declined 5% ending about a half billion dollars short of estimates. that sent shares initially lower in late trading today. as you see on that graphic. josh lipton joins us with more. what is the key takeaway from these results? >> tyler, listen, ibm reports and the big number investors
focused on, 27.7 billion. that was ibm's revenue for the fourth quarter and it was a miss. analysts covering ibm wanted to see 28.3 billion. martin schroeder said some of ibm's business segments appeared solid like software. ibm moved more aggressively into the cloud services saw revenue edge higher but the pain was in hardware where revenue tumbled. lenovo is interested in ibm server business. and importantly besides the disappointing revenue number, ibm did reiterate its commitment to generate 20 bucks in eps in 2015. tyl tyler. >> thanks very much. >> our next guest is a big believer in big blue. dan morgan, senior portfolio manager, thanks for joining us. >> hi, susie.
>> make your case for owning ibm. >> there's no doubt that this quarter in terms of revenue was disappointed and hardware continues to be disappointing but you look at some of their growth drivers in terms of the new initiatives they got involved in in the last couple of quarters, very good growth in their cloud business. it was up 69%. you look at business analytics up 9%. so that's really been the key for them going forward, continuing to show progression in the software area, up 4%. the big drag is hardware, that was a really tough area this quarter and if they can spin off to lenovo like they did their pc unit, which was a good move. that may be the key to moving forward to jump start revenues again. >> you say the successor failure will be determined by the
ability to drive the top line, but so far that hasn't happened. seven consecutive quarters of declining revenue. what's going to change that? >> hopefully some of these growth drivers like i mentioned to get that going again. and potential improvements in china and some of these other markets, most recent quarter, i believe, emerging markets were down significantly. hopeful that that can get going for them. really her success will be determined, the ability to drive revenues in the ability of the new areas, growth drivers to really get going and pick up the whole ship to rise so to speak, which has been a struggle for ibm as you mentioned on the top line. >> dan, you just mentioned china and ibm does get a lot of its business from china, although we heard over the weekend that even china's economy is slowing down from that big engine of growth that it had. to what extent is china a big drag on ibm's earnings? >> on this quarter, that
particular unit hurt a lot. so, you know, china is a faster growing economy than the u.s. but not growing as fast as they have in the past. hopefully down the road it picks back up again. it was a tough quarter but you look at the installation base and huge amount of markets ibm is involved in, the tremendous recurring revenue through the services business, they really kind of steady eddie technology company and you know, hopefully china will recover and that will help them going forward. >> a couple of tough acts to follow, how do you grade her tenure so far or is it too early to grade it at all? if not, why not. >> i'll tell you what, the jury is still out. again, we got to see how these things work out for her going forward. she's been there two years, short period of time. so it's just too early to see if she can really pull this off and
get that top line going. >> real quickly we have a few seconds left. you have a buy on the stock. what's your target for 2014 in terms of ibm stock? >> see i'm not an analyst so i don't have price targets. i'm a portfolio manager. we still believe in it in the long run. it's conservative, patient dividend technology stock. that's the best way to sum it up. >> thank you so much, dan, dan morgan. >> before the bell, three more dow components reported their latest quarterly reports and the earnings were good but the outlooks for the future weren't so great. travelers made by $1 billion in profit by charging higher premiums and paying out less in claims but travelers and other insurers are likely to face increased price competition in the years ahead. verizon signing up more wireless and vios customers.
they are worried about t-mobile and sprint. johnson & johnson, 19% on strong sales of prescription drugs and medical devices but the full year's earnings outlook was below forecast but alex goresky is open timistic about the futu >> we've seen a lower but steadier uptake, particularly in the orthopedics group. we're cautiously optimistic that the demand we're seeing is related to people getting more certainty and frankly to some of the enrollment taking place in affordable care act. we'll have to watch and see over the longer term. >> shares of all three of those dow components fell more than 1% today. >> that mixed bag of earnings led to mixed results on wall street with the costliest blue chip stocks ending the session lower, visa and goldman sachs and ibm.
let's take a look. the dow lost 44 points but the nasdaq closed at the fresh 13 year high and s&p added 5 points. >> blue skies ahead for delta airlines. almost $3 billion in profit in the latest quarter. shares rose 3.25% after the carrier told investors that it expects 3% growth in the current quarter by focusing on higher revenue on the routes it already offers. some flights may have a rough day. massive snowstorm on the east coast forced the cancellation of almost 3,000 flights and caused another 2,000 delays. jim corridor of s&p capital iq says today's storm is bad news for delta and other carriers. >> we're off to a very poor start to a winter season. there's going to be tens of millions of dollars of additional cost added and lost revenue opportunities as passengers cancel their flights,
this is another in a string of bad weather related events for the airline. >> they call upwards from a foot of snow from philadelphia to new england by wednesday morning. >> that snowstorm, along with the blast of arctic air across much of the country is sending temperatures lower and price of natural gas higher. there are also reports of a shortage of propane. what will that mean for the cost of heating your home this winter? >> this winter storm is causing shortages of heating fuels in some parts of the country and sharp rise in prices. a shortage of propane forced ohio's government to declare a statewide energy emergency. more than a third of households in the midwest use poe pain to heat their homes. and they have risen 10% in the past three months. even before the recent cold spell, a huge corn crop harvest had significantly increased the
demand for propane in the central united states. propane, a biproduct of natural gas is used in the equipment that drys corn. demand for natural gas is skyrocketing as well and prices are following suit due to the record cold this winter. >> it's having an impact on what we've got suppliwise to last through the winter. whenever we get hit with a really cold storm, do we have enough to make it to the end of the winter with the current supplies of natural gas we have? as the cold weather comes in we spike up. >> natural gas supplies declined by the most on record last week as heating demand hit nearly five times historical norms this time of year. more than half of the country uses natural gas to heat their homes and the energy department predicts consumers will spend 13% more on the natural gas bills this winter than last. good news about forecast for global economic growth, international monetary fund just raised its outlook for worldwide
growth for the first time in nearly two years on rising consumer demand and higher inventories, especially in the most advanced economies. >> that will certainly be one of the topics of conversation in davos switzerland where political business and entertainment leaders around the world are meeting for the world economic forum and they'll talk economic followcy policy and philanthropy and new business deals. >> reporter: 4,000 miles from new york city is davos, switzerla switzerland. it's the birthplace of many modern winter sports. it's a permanent population of 11,000, come january every year, many of the residents bolt making way for the 2500 or so participants. world economic forum that arrive by train and car and helicopter and come from more than 100
different countries tackling the world's biggest problems. >> the united states is doing a little better than the average country. europe stands to have a recession that by some measures as bad as the great depression. they are a lot richer, you can't compare but it's pretty severe. >> the theme of this year's meeting, reshaping of the world. consequences for society and politics and business. a theme that will be tackled by the likes of ceos for morgan stanley and goldman sachs and ubs and marriott and google to name a few. with such high profile attend ees all in one location, security is extremely tight. from snipers on rooftops to heavily guarded checkpoints getting around isn't easy. >> any time you have the chance to answer the questions of who, when and where and how, you give an adversary an advantage to do something. by its nature, i think you do increase the risk. >> it goes far beyond the
advicible security though. the organizers are making sure information security is safe as well. that includes e-mails and phone calls and any electronic documents. in a statement the organizers write the world economic forum takes information security seriously. we look at it from various angles ranging from our reports drawing attention to it as a major area of global business risk to an operational level. we employ encryption technologies when required and subject ourselves to external and internal audits. >> this is the place where business meets business, meets philanthropy meets the arts. where nelson man dell la met capitalism, what is going to be the big headline this year? we'll have to say. there are big names, secretary of state kerry will be joining davos as is the secretary of the treasury jack lew. netanyahu along with the
president of iran. davos, switzerland. >> will netflix, the best performing s&p stock of 2013 blow past estimates when it reports tomorrow. we'll tell you what to expect right after this. >>? of the biggest names in oil exploration and oil services are seeing higher profits these days thanks to strong performances outside the u.s. energy boom. morgan brennan has more on what's energizing profits. >> reporter: don't credit the energy boom sweeping the u.s. for helping out halliburton and baker hughes. instead, look overseas, analysts
say they have been expanding their international operations in search of bigger profits. >> that's where a lot of the growth is, historically seeing strong growth from emerging markets and also where a lot of resource is. it's a case of follow the oil, follow the money, follow the growth. >> markets like the middle east, ai asia pacific and europe have fueled growth. baker hughes, the world's third largest servicer saw a 27% increase in revenue growth. the other big growth areas, europe, africa and russia. saw revenue increase 18% from its middle east and asia operations as well and halliburton up 13% in the same region. all of that compared to low single digit growth in north america. why is the international market so strong? less competition and mild regulations mean more offshore drilling and offshore drilling
means biggest profit margins. >> if you look at international capital spending, it's 70 to 75% of spending and the revenue is 50, 45% north america. it's a reflection of the investment they made in recent years to catch up with the mismatch. >> it's not adds if they are abandoning the energy boom, they peg those rrnlgs as key to their growth going forward. in the return to cash in on the energy revolution, the stocks overseas shouldn't be overlooked. i'm morgan brennan. activist hedge fund third point capital is taken a stake in dow chemical and pushing for a spinoff. third point, which is run by dan loeb has a $1.3 billion stake in the country, the firm's largest investment by dollar value.
they are pushing dow by revenue to sever the pet trow chemical business, shares rose more than 10% today to $45.93. the oreo cookie maker mondelez, ends pelts's campaign to have the company to sell itself to pepsico to generate more profit. shares fell more than 2% today to $34.45. amd posted earnings after today's close. they swung to a profit of new gaming consoles. the chip maker, however, posted a weak outlook and that disappointed investors. shares initially plunged after hours as you see on that graphic. the stock ended the regular session do you kndown slightly. shares of blackberry spiked after it landed a big government contract. 80,000 blackberry devices will be linked to the pentagon's
management system at the end of january. that secures the company's position as the long time supplier of government phones. shares popped more than 9% to $9.93. td ameritrade was popular with investors, surged by 31% from last year. the company says that's because more customers felt confident about trading in the stock market as well as improving commission and transaction fees. >> our investors, investing all the way through this. if you look at our investor movement index, it's been climbing for a good, six, seven, eight, nine months. we had one month where it went down. so it's been pretty healthy. >> about 4.5% to $33.85. now shares of fireeye took a hit after jm morgan downgraded the cyber security firm to neutral from overweight. the company is innovator but slashed rating because of val
valuation concerns. target's data breach drama continues. they downgraded the retailer stock and slashed price target. the analyst is expecting target to indefinitely extend the buy back which is a key support for the stock. shares stuckled to $59.20. that is a 52-week low. how about google trading at $1,405. that's the new price target from two leading tech analysts today, they cited the company's continued growth in ad revenue and pacific crest says it expects strong fourth quarter earnings. shares were up 1% to close $1,163.70. one of the most anticipated reports is due out after the bell on wednesday when we hear from netflix. what are investors of this
streaming movie and tv service looking for? julia bore sten has more. >> reporter: with netflix shares up, they are expecting significant growth in fourth quarter results. analyst expects to 66 cents and revenue expected to grow 33% to $1.7 billion. >> it's still a subscriber growth story. but if there is upside to the streaming subgrowth, that will be a positive for the stock. >> netflix is u.s. streaming subscribers will be the number most in focus. they expect the company to add 2 million more bringing total to more than 33 million at the end of 2013. subscriber numbers are a key indicator of whether netflix's big move into original exclusive shows like "house of card"s is paying off.
investors will be watching how much the cost of content is impacting earnings. expect analysts to ask about international expansion and whether netflix plans to change its pricing. >> we think investors are having an assumption they'll raise pricing longer term from the $8 per month they charge in the u.s. for streaming today to maybe $10 plus longer term and the recent report suggests netflix is testing lower price plans. we like to hear more about that as well as any updates on competition they see in the market. >> another hot top for netflix's earnings call, ceo reed hastings outlook on competition. hbo and also the likes of amazon, spending more on original and exclusive shows looking for a piece of netflix's success. i'm julia borsten. >> what's causing the tug of war between producers and refiners
and what it might mean for you, the consumer? a familiar face to nbr viewers is stepping down at the world's biggest bond fund operator. he will stay with pimco's parent company after he steps down in march. he'll serve as an adviser on global economic and policy issues. with the u.s. currently producing more oil than it imports, the prospects for even more domestic production are good. perhaps enough to begin exporting again to the rest of the world. that's causing a tug of war between energy producers and oil refiners. what does all of that mean for
consumers? jackie deank list reports. >> boomtown usa, it's here and here and here. shell oil will push production to highs not seen since 1971 so says the international energy agency and analysts say u.s. energy independence is on the horizon the year 2020. increased production is driving up supply. the upside for consumers lower oil prices maybe cheaper gas and maybe lower heating bills. we may have more energy than we need which has led to a debate over what to do with the excess supply. energy producers hoping to find more buyers in higher prices are lobbying the obama administration to lift the ban on u.s. exports put in place during the arab oil embargo in 1973. domestic refiners who buy crude oil are pushing back. >> the debate over crude oil exports is one about dividing up the pie between the crude oil producers and oil refiners.
>> andy is an oil industry consultant who says domestic refiners are enjoying an advantage because the supply of crude is up making it relatively cheap. >> if the u.s. were to allow crude oil exports, i expect that the domestic crude oil price is going to rise to world oil levels. >> some experts say it's way too soon to have this debate. the u.s. is importing 7 million barrels of oil every day, just under the 8 million it produces on its own, making the export debate a nonstarter. >> we're a long way off from oil independence. one of the things that we do have to look forward to is u.s. production combined with canada and increases in mexico could make north america oil independent. >> traders are also saying global crude proiss would have to come back down close to $70 a
barrel. in the meantime, producers will continue to battle with refiners as both sides look for ways to turn black gold into cash. for "nightly business report." >> finally tonight, we're only two months away from basketball's march madness, but things are already getting a little crazy. the mortgage lender quicken loans is teaming up with warren buffett's berkshire hajaway, offering a chance at the $1 billion prize for completing a perfect bracket in this year's men's college basketball tournament. quicken is putting up the money and berkshire hathaway is ensuring the prize. the odds of picking a perfect brangt every single game are one in nine quadrillion. if you select the winner of every single game, you could get 45 annual payments or lump sum of half a billion. >> you better get your calculator out and start working
the numbers. >> absolutely. >> that's "nightly business report" for today, i'm susie gharib, thanks for watching. >> nightly business report has been brought to you in part by -- founded by jim cramer, the street.com is an independent service, home to multimillion dollar portfolio. you can learn more at the street.com/nbr.
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